How Will PepsiCo (PEP) Stock React To India’s Request To Develop Healthy School Lunches?

NEW YORK (TheStreet) -- PepsiCo Inc. (PEP) was asked by the government of India to help feed the nation's school children by developing healthy processed foods, which will be included in school lunches, Bloomberg reports.

PepsiCo is the largest snack maker in the world and is mostly known for items like Lays Potato Chips, Pepsi and 7Up, Gatorade, Naked Juice, and Quaker products.

India's government has allocated $2.2 billion to fund the healthy foods program through March 2015, Bloomberg added.

The healthy lunch program's local food suppliers were accused of incompetence regarding the safety of the different foods children were eating, after 23 children in Northern India died after consuming meals laced with insecticide, Bloomberg added.

Shares of PepsiCo are down by -0.42% to $92.21 on Wednesday morning.

Separately, TheStreet Ratings team rates PEPSICO INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate PEPSICO INC (PEP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, revenue growth, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

Despite its growing revenue, the company underperformed as compared with the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Net operating cash flow has slightly increased to $2,491.00 million or 7.69% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.52%.

PEPSICO INC reported flat earnings per share in the most recent quarter. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PEPSICO INC increased its bottom line by earning $4.32 versus $3.92 in the prior year. This year, the market expects an improvement in earnings ($4.59 versus $4.32).

The gross profit margin for PEPSICO INC is rather high; currently it is at 57.56%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.70% trails the industry average.